Max India sells films unit to Treofan for Rs 540 crore

NEW DELHI: Analjit Singh-led Max India is selling its 22-year-old speciality films business to Germany's Treofan for an enterprise value of Rs 540 crore as part of the strategy to focus on its core businesses of healthcare and insurance.

"The offer from Treofan is subject to financing, a material adverse change clause, confirmatory due diligence, execution of mutually satisfactory sale and purchase agreements, management retention, formal approval from Treofan's advisory board and receipt of regulatory and corporate approvals," said Max India in a press release.

ET first reported in April Max India's plans to sell the specialty films division.

The Delhi-based company's shares closed at Rs 190.35 on Monday, up 3.54% at the Bombay Stock Exchange ahead of the late-evening announcement.

The speciality films, or biaxially-oriented polypropylene (BOPP) unit, is one of Max India's oldest businesses. Over the years, the company has divested many of its businesses, including pharmaceuticals, telecom and electronics, but the BOPP unit always remained part of its portfolio.

"It was an emotional decision for me personally, but the board and management rightly decided that it made good business sense to focus on our portfolio of service-oriented businesses of life," said Max India chairman Analjit Singh.

The speciality films division is the only business which is housed in Max India, the listed entity. The company operates its insurance businesses through joint ventures and holds a 74% stake in its healthcare venture, Max Healthcare. Life Healthcare of South Africa owns 26% in Max Healthcare. Once the speciality films transaction is closed, Max India will become a pure investment company. The films division had an annual manufacturing capacity of 50,000 tonnes per annum. During 2011-12, it clocked revenues of Rs 703 crore and operating profits of Rs 77 crore. It has debt of Rs 105 crore.

An executive from a global consultancy firm, who tracks Max India's insurance business, said the BOPP unit was a "misfit" in the company's overall portfolio. The cash from the deal would enable the company to drive growth organically or through acquisitions. "When you are expanding, access to cash is handy," he said. Max India MD Rahul Khosla said additional funds from the deal would provide the company with several investment options to drive growth.

The BOPP deal is Max India's third major transaction in the last one year. In April, it brought in Japan's Mitsui Sumitomo to replace US-based New York Life Insurance in its life insurance venture, making a windfall gain of Rs 802 crore in the process. In October 2011, it sold a 26% stake in its hospital chain Max Healthcare for Rs 516 crore to South Africa's Life Healthcare.